Is ByteDance really selling its secret sauce algorithm?

At a glance, this move seems like a revelation of its key secrets. ByteDance, the owner of the viral app TikTok, has released a new service called BytePlus where it sells many of the key capabilities used in the TikTok app. 

TikTok is the most popular short video app all over the world. Its recommendation algorithms are often said to be the secret sauce behind its success: users get glued to the app because it keeps pushing videos they actually like.

In fact, ByteDance recorded a revenue of 34.3 billion USD with 1.9 billion users in 2020 – a good amount of that can be attributed to TikTok. 

What is the so-called secret sauce algorithm you might ask then? It is the recommendation engine that powers TikTok’s video curation. This is similar to the recommendation engines that decide what products Amazon recommends to you as you browse, or what ads you see from Google after a certain search. 

TikTok uses a similar algorithm to curate its For You page, where it features videos that someone might be interested in. In fact, this algorithm is so good that some users say they first learned about a mental health condition they had or discovered their sexual orientation through TikTok’s recommendation – the algorithm knew them better than they knew themselves!

How is that a surprise? We always know less about ourselves than we think we do. Think about all the companies that make decisions based on consumer surveys. Consumers say there is a product that they wouldn’t mind using, and they can think of situations where it would help. But in reality, consumers don’t even consider buying it, much less using it. And then all the money invested by the business, based on what the consumer ‘believes’ they will do, is wasted.

The algorithms were also the core of ByteDance as a company, which started as Toutiao – a news aggregator which pushes news articles you actually like. Many other consumer products of ByteDance are also built on a similar backbone. 

With such an outstanding system, ByteDance could have simply left it as it is and allowed TikTok to bring in its revenue. But they have smartly chosen to leverage their strengths and set up the product line of BytePlus. 

These features are all aspects of the original TikTok app, such as the visual effects, the translation of comments, and the most exciting one, the recommender! 

Packaged as the BytePlus Recommend, the possibility of leveraging such an effective and recommendation algorithm forces companies and startups alike to ask themselves this question – “Should we bother?”

The short answer is – Maybe. If you are in the rare group that expects an adaptable recommendation system that you are in full control of and have the necessary resources, it may be worthwhile to invest in your own. 

At the same time, if you expect ByteDance to compete with you at some point, it may not be the best idea to let them get close to your data.

For the rest of us, it seems like an excellent deal. You can save time and resources and focus on strengthening our other features, particularly if those, rather than recommendations, are your real draw. 

In fact, one such convincing case was Musical.ly – they grew explosively, but could not sustain the growth because they didn’t have the capabilities to keep recommending to users what they like. That is until they were acquired by ByteDance. 

Combined with proprietary algorithms that Founder Zhang Yiming helped make, the new TikTok app, based on a lot of elements from Musical.ly, exploded in popularity. They combined the existing user base and the enjoyable short form video style with personalized recommendations that just kept drawing you back to the app, creating the fearsome social app that it is today.

The current lineup of BytePlus customers are still largely Southeast Asian tech businesses founded by the Chinese, with the notable exception of WeGo, a Singapore-based OTA more popular in the Middle east. 

These baby steps could allow BytePlus to figure out how to apply its algorithms and other features into more products, and eventually feedback to its infrastructure – creating a very positive cycle. 

To answer our question earlier, no – ByteDance isn’t selling their secret algorithms; They’re selling something better.

The real casualties here, probably, are the local and regional AI companies that offer similar solutions but do not have the data, experience, and financial resources as ByteDance. 

But then, nobody can guarantee that BytePlus is a sure success. Ultimately it is a small department in the ByteDance ecosystem, which has much larger money spinners. 

In that regard, it is different from the Amazon – AWS relationship.